Every trade can lose. Here are the specific risks to know before trading on Polymarket or Kalshi.
If you buy YES and the event doesn't happen, your shares pay $0. Prediction markets are binary — but unlike leveraged products, you can never lose more than your stake.
Thin markets have wide bid-ask spreads (5-15 points). Entering and exiting at fair prices is harder when volume is low. Check order book depth before trading niche markets.
Ambiguous events can produce disputed resolutions. Always read the resolution criteria carefully — the title isn't the contract. Polymarket uses an oracle system; Kalshi resolves centrally.
The prediction market regulatory landscape is evolving. Polymarket has restricted US access on some markets. Kalshi is CFTC-regulated and more stable for US traders.
Polymarket runs on blockchain smart contracts. Code can have bugs. Don't hold more in your Polymarket wallet than you're actively trading.
Prediction market strategy → Tax implications →